GasLog deal shows LNG spot rates still ahead of charters

But ships estimated earnings of $75,000 per day still expected to drive returns in the low teens.

LNG carriers are still earning more on the spot market than they are on the charter market, GasLog's recent deal with Cheniere Energy shows.

The Paul Wogan-led company said Wednesday its two 174,000-cbm newbuildings — set to go on seven-year charters with the US gas exporter once completed in 2021 — fetched "mid-cycle rates," which Deutsche Bank's Chris Snyder estimated in a note to be $75,000 per day.

That figure is lower than the six-figure rates LNG carriers are earning on the spot market, which Snyder attributed to the length of the deal and the lag-time between order and completion.

"This period covers a decade which will encompass at least one full shipping cycle given the significant volatility in the industry," he wrote.

Still, the deal can be a good one, with Snyder expecting the charter to drive returns in the low teens.

"We consider this to be a very healthy return given the limited risk [GasLog] is taking on by sourcing a contract prior to ordering the vessel," he wrote.

"While the company does take on some residual risk, we view this to be minimal given the strong secular growth trends for natural gas and more specifically LNG over the next 20-30 years."

GasLog deal shows LNG spot rates still ahead of charters

GasLog deal shows LNG spot rates still ahead of charters

But ships estimated earnings of $75,000 per day still expected to drive returns in the low teens.

LNG carriers are still earning more on the spot market than they are on the charter market, GasLog's recent deal with Cheniere Energy shows.

The Paul Wogan-led company said Wednesday its two 174,000-cbm newbuildings — set to go on seven-year charters with the US gas exporter once completed in 2021 — fetched "mid-cycle rates," which Deutsche Bank's Chris Snyder estimated in a note to be $75,000 per day.

That figure is lower than the six-figure rates LNG carriers are earning on the spot market, which Snyder attributed to the length of the deal and the lag-time between order and completion.

"This period covers a decade which will encompass at least one full shipping cycle given the significant volatility in the industry," he wrote.

Still, the deal can be a good one, with Snyder expecting the charter to drive returns in the low teens.

"We consider this to be a very healthy return given the limited risk [GasLog] is taking on by sourcing a contract prior to ordering the vessel," he wrote.

"While the company does take on some residual risk, we view this to be minimal given the strong secular growth trends for natural gas and more specifically LNG over the next 20-30 years."

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